‘Unprecedented times’ gets thrown around a lot these days but I think when it comes to the disruption we are experiencing in the supply chain and continued impacts of COVID, it’s hard to think of a more appropriate description without getting too melodramatic.
I doubt there will be any argument that the disruption exists. The impact might be felt differently across regions and industries but one way or another we are all dealing with the challenge. The key question is how we deal with challenges. There’s plenty of research, like this article from HBR – How to survive a recession and thrive afterwards – that shows how companies can make the most of the difficult times to change and emerge stronger.
I personally really like the analogy that in a cycle race, like the Tour de France, the gains are made on the uphill climbs rather than the downhill or flat parts of the course.
In the hope of being helpful, I’ve compiled a list of the ways in which companies are or could tackle the current and future supply chain challenges. These are suggestions we’ve picked up through our global network and through the many conversations we are having with clients everyday here in NZ.
At a tactical level, that being initiatives that deal with the immediate challenges and are relatively straightforward to implement, we have:
As you well know, supplies like paper, adhesives, and ink are in continued demand and short supply. As a result the price is continually rising. As I mentioned earlier, bulk ordering ahead of time can help offset some of these increases and give you certainty of supply. It’s critical that you are communicating regularly with your clients about these shifts in the market and that you have provided yourself the flexibility to price the work accurately and allow for changes to maintain your profit margins.
Planning and forecasting
We have become accustomed to focusing on the near term. We tend to look at things in terms of the next week, month and quarter. The reality of our current situation dictates that we need to be looking at the next 12 months to the extent possible. We need to be communicating with customers about their plans for the next 12 months and beyond and then relaying this back to suppliers. Even if it’s only an indicative plan, forewarned is forearmed, as the saying goes.
Even simple things like placing orders as soon as possible rather than waiting for files and final sign off. And build buffers into the timelines you set with your clients. Every little bit helps. Afterall, it’s better to exceed expectations.
Being more flexible, and encouraging your customers to be more flexible, around the brand, sizes and weights of the stocks you use will likely help avoid delays and potentially cost. In most cases, the more commodotised stocks will be held in greater quantities.
All advice and evidence suggests that you maintain the relationships with your existing suppliers. This is particularly true if they are serving you well. In most cases, your existing partners will know and understand your business and therefore be in the best position, and often most willing, to help you navigate these challenging times. That said, being singularly dependent on one supplier puts you at risk so make sure you understand all the players in the market and investigate the network your current suppliers can call on in times of need.
Click and collect
We’ve seen an increase in self service over the past few years. That being, clients enable their customers to drop off and pick up work to reduce the reliance on couriers. This is particularly important for urgent work that can’t afford any delays that might be experienced in the courier network. Obviously this will only suit particular jobs and clients so I’m not suggesting you cancel those courier contracts just yet.
Supply chain mapping
Identify all the suppliers and subcontractors involved in getting your product from its raw state into the hands of your customers. This goal here is to understand the journey and identify any potential issues that may occur. What happens if a supplier goes out of business or product can’t be sourced? Are there any efficiencies to be gained? For every identified risk there should be an understanding of the impact and a corresponding mitigation or contingency.
This exercise should form part of your regular planning cycle. The outcome of this exercise should be shared with suppliers. In fact, working with suppliers to understand their supply maps and resilience should be part of the programme. There have been a number of global manufacturers that have been closed indefinitely due to their poor emissions standards. Your choice of suppliers has never been more important.
According to BCI, 75% of businesses now expect to check business continuity and supply chain resilience as part of their negotiations with any new supplier.
At a more strategic level, that being the more significant changes required to prepare your business for the longer term:
A just-in-case inventory model
There has been a definite shift away from the traditional just-in-time inventory model to what has been coined the just-in-case model. As the name suggests this change in approach looks to reduce the exposure to international shipping price increases and delays by increasing inventory levels through larger and less frequent orders.
We have been working with clients who have adopted this model to help them offset the need for greater storage space and minimise the additional warehouse rental expenses.
Increasingly we are seeing supply chain resilience forming a key component of product design. Rather than trying to minimize supply chain disruption late in the game, companies are considering resilience at the point of product design. Using available market intelligence to understand where upstream constraints exist and making decisions on which suppliers and components to use to meet their needs and limit their supply chain risk. Helping your clients make informed decisions about the product design and packaging will help build stronger relationships and help with your forecasting.
The disruption over the past few years has lead a number of organisations to look at diversification strategies to build more resilience and sustainability into their business.
One of the growth areas over the past 2 years has been 3D printing as organisations look to mitigate product availability issues and shipping delays by printing the component parts they or their customers need. 3D printing provides a number of benefits including faster turnaround times, localised production, reduced transportation costs and in some cases lower inventory levels and costs.
Labour shortages have had a significant impact on business operations over the course of the pandemic. As a result we have seen a number of organisations adopting more agile work practices and processes. There has also been a significant investment in technology to enable working from home and remote working.
Technology is also enabling increased automation, increased adaptability and productivity and reducing manual and often error prone tasks. We are also seeing the integration of operations through cloud technology to enable remote visibility and operation.
Like it or not, lower emissions, decarbonising and lowering our environmental impact are a core focus for business activity now and for the next 30+ years. Governments around the world are committed to building a zero carbon economy and there is nothing that will stop it.
As previously stated the impacts to business will be significant and so organisations are beginning to mobilise. Understanding your carbon footprint and your environmental impact is the recommended starting point. As the saying goes, you can’t change what you can’t measure. From there it’s a matter of developing a plan and targets, taking into consideration your supply chain,
Obviously the above list is not exhaustive and it goes without saying that I’m not an expert. The underlying hope is that it helps stimulate the thinking within your business on how to best prepare for the current and ongoing challenges we face. I hear a lot of people asking “when will things go back to normal?” I think its time to recognise that things will never return to the way they were and we need to start preparing for the way things are likely to be.